Key Takeaways
- • John Dorfman's annual column of hedge-fund-favorite picks returned 23.6% in its first year and 23.3% in its second, both beating the S&P 500 Total Return Index (15.3% and 15.9% over the same periods), according to the column.
- • Dorfman picks five stocks drawn from Gurufocus.com's screen of hedge-fund favorites: CNX Resources, Raymond James, Plains All American Pipeline, Nvidia and Goodheart-Willcox.
- • Renaissance Technologies and Bridgewater Associates both bought CNX Resources and Raymond James in filings covering the second quarter, per government filings cited in the column.
- • The column itself describes its results as hypothetical, not client results, and notes that past performance does not predict future returns.
Summary
John Dorfman, chairman of Dorfman Value Investments in Newton, Massachusetts, published his third annual column on stocks drawn from Gurufocus.com's screen of hedge-fund favorites. In the first year of the series his picks returned 23.6%, and his list from the following year returned 23.3%. Both lists beat the S&P 500 Total Return Index, which gained 15.3% and 15.9% over the same two periods. Dorfman stresses that these column results are hypothetical, are not the results he achieves for clients, and that past performance does not predict the future. He said that a 23% return would thrill him and that anything above 18% would be delightful.
The new picks include CNX Resources (CNX), a Canonsburg, Pennsylvania natural gas producer operating in Ohio, West Virginia and Pennsylvania. Dorfman notes that CNX lost money in six of the past ten years but has recently recovered, with a 21% return on stockholders' equity, and that natural gas is supplying some power for data centers. Renaissance Technologies and Bridgewater Associates both bought CNX in the second quarter, though Dorfman does not know whether they still hold it. Raymond James Financial (St. Petersburg, Florida) is also held by both firms this year. Dorfman says it has been profitable 38 consecutive years, trades at about 14 times earnings versus a typical 15, and has averaged better than 12% annual revenue growth over the past decade.
Other picks include Plains All American Pipeline (PAA), a Houston master limited partnership with about 19,000 miles of pipeline, which Dorfman says trades at seven times trailing earnings and 0.34 times revenue, with a return on equity near 27%. He also cites Nvidia (NVDA), which he had previously avoided as too expensive, now trading at 27 times trailing earnings and 14 times analysts' next-four-quarter estimates. The fifth pick is Goodheart-Willcox (GWOX), a Tinley Park, Illinois textbook publisher, which he says trades at about 11 times earnings with a 31% return on equity.
Looking back, Taiwan Semiconductor (TSM) and Caterpillar (CAT) were last year's standouts, rising 46% and 42%. Berkshire Hathaway (BRK.B) rose 7%, Walmart (WMT) 9% and JP Morgan Chase 13%. Dorfman attributes Caterpillar's gain to data-center demand for its gas turbines and generators rather than the weak-dollar export thesis that led him to select it. The column carries disclosures that Dorfman and his firm hold positions in several of the names discussed.
The new picks include CNX Resources (CNX), a Canonsburg, Pennsylvania natural gas producer operating in Ohio, West Virginia and Pennsylvania. Dorfman notes that CNX lost money in six of the past ten years but has recently recovered, with a 21% return on stockholders' equity, and that natural gas is supplying some power for data centers. Renaissance Technologies and Bridgewater Associates both bought CNX in the second quarter, though Dorfman does not know whether they still hold it. Raymond James Financial (St. Petersburg, Florida) is also held by both firms this year. Dorfman says it has been profitable 38 consecutive years, trades at about 14 times earnings versus a typical 15, and has averaged better than 12% annual revenue growth over the past decade.
Other picks include Plains All American Pipeline (PAA), a Houston master limited partnership with about 19,000 miles of pipeline, which Dorfman says trades at seven times trailing earnings and 0.34 times revenue, with a return on equity near 27%. He also cites Nvidia (NVDA), which he had previously avoided as too expensive, now trading at 27 times trailing earnings and 14 times analysts' next-four-quarter estimates. The fifth pick is Goodheart-Willcox (GWOX), a Tinley Park, Illinois textbook publisher, which he says trades at about 11 times earnings with a 31% return on equity.
Looking back, Taiwan Semiconductor (TSM) and Caterpillar (CAT) were last year's standouts, rising 46% and 42%. Berkshire Hathaway (BRK.B) rose 7%, Walmart (WMT) 9% and JP Morgan Chase 13%. Dorfman attributes Caterpillar's gain to data-center demand for its gas turbines and generators rather than the weak-dollar export thesis that led him to select it. The column carries disclosures that Dorfman and his firm hold positions in several of the names discussed.
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